Should You Buy a Duplex? What to Know About Small Multi-Family Homes
Should you buy a duplex?
Short answer: It can be a smart way to buy, because rent from the other unit can help with your payment, but it comes with more responsibility than a single-family home. You’re also a landlord. Before you start looking, understand the financing, the cost of owning two units and the rules for renting.
Duplexes aren’t the right fit for everyone, and we’d rather tell you that up front. Here’s how we’d think it through.
How financing works for 2 to 4 units
The most common way first-time buyers do this is with an FHA loan. FHA can finance a property with up to four units as long as you live in one of them. A few things to know:
- The minimum down payment is 3.5% for buyers who meet the credit requirements.
- At least one borrower has to move into one unit within 60 days of closing and plan to stay for at least a year.
- Duplexes don’t have to pass a rental income test. Three- and four-unit properties do, and they also have cash reserve requirements, so ask your lender early.
You can also look at conventional loans. Their down payment and credit rules for multi-unit homes are different, so ask a lender to compare options. Talk to more than one, and compare APR and fees. That’s good advice on any loan.
Is the rent going to cover the payment?
Maybe, maybe not. Here’s how we’d run the numbers with you:
- What would the other unit rent for? Look at what similar units nearby actually rent for, not what the listing hopes.
- What are the costs? Add up the mortgage, property taxes, insurance, utilities that you pay, repairs and maintenance.
- Plan for empty months. Even a good unit sits empty between tenants.
- Leave a cushion. If the numbers only work when everything goes right, they don’t work.
A mortgage calculator helps with the first part. Try ours, then add the rest. Use the mortgage calculator.
What we’d check on the property
- Both units, top to bottom. Roof, furnace, water heater, plumbing and electrical matter twice as much with two households.
- Separate or shared utilities. Who pays for what changes your math.
- Existing leases and tenants. If someone lives there, ask to see the lease, the rent, the deposit and how long they’ve been there.
- The last 12 months of expenses. If the owner has records, ask for them.
- Inspection. Get a thorough one, and think about radon and a sewer scope.
The landlord part
Being a landlord means following the rules, and they apply from the first day. You’ll need to follow fair housing laws when you advertise and choose tenants, and you’ll want to learn Missouri landlord-tenant law (or Kansas, if you’re across the line). Cities also have their own rules about rental registration or inspections, and they differ from one city to the next, so ask the city before you buy. Landlords also usually need a different type of insurance than a homeowner who lives in a single-family home. Ask an insurance agent early. We aren’t tax or legal advisors, so for questions about taxes on rental income or lease language, ask a CPA or an attorney.
If you’ve never been a landlord, picture the phone call about a broken water heater at 9 p.m. on a Sunday. If that makes you want to hide under a blanket, you can still own a duplex, but you may want to talk to a property manager first. Ask us, and we’ll point you to people we trust.
Where to look
Small multi-family homes don’t come up as often as single-family homes, so it helps to be ready when one does. Tell us what you’re after, and we’ll set up a search so you hear about them early. Tell us what you’re looking for.
What this means for you
A duplex can be a great first purchase for the right person. The key is to run honest numbers, understand what being a landlord involves and talk to a lender early. Talk to us and we’ll help you figure out whether it makes sense for you.
Sources
- HUD, FHA Single Family Housing Policy Handbook 4000.1 (one- to four-unit principal residence, required investment, credit score). https://archives.hud.gov/offices/adm/hudclips/handbooks/hsgh/4000-1/HB-4000-1-2025-01-10.pdf
- HUD, Fair Housing Act. https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview
Frequently asked questions
Can I buy a duplex with an FHA loan?
Yes. FHA can finance a property with up to four units as long as you live in one of the units as your primary residence. The minimum down payment is 3.5% for borrowers who meet the credit requirements. Three- and four-unit properties have extra rules, including a rental income test.
Do I have to live in the duplex?
With an FHA loan, yes. At least one borrower must move into one of the units within 60 days of closing and intend to live there for at least a year. If you want to buy a duplex purely as an investment, other loan types apply, and your lender can walk you through them.
